Sinopec aims to increase its 2008 crude oil processing capacity by 34% from 2006 to 196 million metric tons, or 3.94 million barrels a day, the company said in a report on sustainable development on its Web site Thursday.

Between 2004 and 2006, Sinopec's processing capacity increased by only about 5% a year because a government cap on domestic oil product prices dissuaded the company from investing despite strong consumer demand for fuel.

Earlier this year, the Chinese government proposed a more market-oriented approach to oil product pricing based on crude costs, refining costs and some profit margins.

The policy shift has sped up Sinopec's efforts to enhance its refining capacities, particularly along the Yangtze River area in central China, where the major markets are.

Sinopec said last week it is boosting the capacity of a refinery in Wuhan city in central China by 60% to supply feedstock to its planned 800,000-metric-ton-a-year ethylene facility nearby.

The company is also considering expanding five other refineries along the Yangtze River, aimed at upgrading the facilities to produce higher-quality oil products.

Sinopec also said it will increase its ethylene output capacity to 7.1 million tons in 2008, up 14.5% from 2006.

Upstream Expansion: Another Focus

Sinopec, which is also the country's second-largest oil and gas producer after PetroChina Co. (PTR), aims to produce 10 billion cubic meters of natural gas in 2008, or 37.6% more than it produced in 2006.

The growth rate will be much higher than the rates between 2004 and 2006, which were in a 7%-16% range.

Beijing has been pushing for the wider use of natural gas as it aims to cut pollution in major cities ahead of the 2008 Olympic Games. The country is also under international pressure to cut emissions of greenhouse gases.

Sinopec also said it wants to produce 42 million tons of crude oil, equivalent to 308 million barrels, in 2008. The target is up 4.6% from 2006.

It added it will diligently explore more oil and gas reserves and to enhance the production of aging fields.

Earlier this year, Sinopec announced the discovery of Puguang Gas field in Sichuan province, the country's largest to date. The company estimates the field's proven recoverable gas reserves at 800 billion cubic meters.

Sinopec expects the Puguang field to produce over 10 billion cubic meters of gas a year when it starts operating by end-2008.

Late May, Sinopec said it discovered more crude oil reserves in Tahe Oil Field in northwestern China. The Tahe field has been a major contributor to Sinopec's output, accounting for about 13% of its total crude oil production as of mid-2006.

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